Correlation Between Salomon A and Zanlakol

Can any of the company-specific risk be diversified away by investing in both Salomon A and Zanlakol at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Salomon A and Zanlakol into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Salomon A Angel and Zanlakol, you can compare the effects of market volatilities on Salomon A and Zanlakol and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Salomon A with a short position of Zanlakol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salomon A and Zanlakol.

Diversification Opportunities for Salomon A and Zanlakol

-0.12

Correlation Coefficient

Salomon A  Zanlakol

Good diversification

The 3 months correlation between Salomon and Zanlakol is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Salomon A Angel and Zanlakol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zanlakol and Salomon A is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Salomon A Angel are associated (or correlated) with Zanlakol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zanlakol has no effect on the direction of Salomon A i.e., Salomon A and Zanlakol go up and down completely randomly.

Pair Corralation between Salomon A and Zanlakol

Assuming the 90 days trading horizon Salomon A is expected to generate 8.44 times less return on investment than Zanlakol. In addition to that, Salomon A is 1.94 times more volatile than Zanlakol. It trades about 0.01 of its total potential returns per unit of risk. Zanlakol is currently generating about 0.11 per unit of volatility. If you would invest  372,257  in Zanlakol on August 31, 2024 and sell it today you would earn a total of  32,643  from holding Zanlakol or generate 8.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Salomon A Angel  vs.  Zanlakol

Salomon A Angel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salomon A Angel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Salomon A is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Zanlakol

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zanlakol are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zanlakol may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Salomon A and Zanlakol

The main advantage of trading using opposite Salomon A and Zanlakol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salomon A position performs unexpectedly, Zanlakol can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Zanlakol will offset losses from the drop in Zanlakol's long position.

The idea behind Salomon A Angel and Zanlakol pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.